Economies of scale is a term that is thrown out quite a bit in the business world. On the west coast where I’m from, scale is a favorite term of tech entrepreneurs. Management and executives talk about leveraging scale. Investors seek out scalable companies. Every first-year business school student is familiar with the term. What[…]
I’m on a plane back from Atlanta to Orange County, California as I write this. I spent the past few days in Atlanta with AkzoNobel talking to distributors, jobbers, shop owners, and senior execs across North America about business growth, strategy and finance. We talked about ways to grow your business in a consolidating industry.[…]
One of the great parts about my job is that I get to work with really intelligent people in really interesting places. I just got back from 5 days of client meetings in New York. It really fires me up to work with such motivated passionate people in the industry. During our meetings, one of[…]
I just wrapped up a week in Detroit where I presented at an industry event organized by a major paint manufacturer. I discussed growth strategies in a consolidating industry. We talked about industry evolution and ways to increase the value of your business by taking advantage of the same trends and using the same corporate[…]
Previously we spoke about how the CFO drives growth, and three main areas the CFO adds value: historical financial and vendor analysis, current working capital and cash management, and future budgeting and investment analysis, including acquisitions. One area in particular that we did not discuss, however, was the benefit the CFO brings to the table as an outside strategist and leader responsible for setting and implementing strategy in conjunction with other senior managers within the company. As the primary individual responsible analyzing past and current financial data, as well as budgeting for future growth, the CFO has a unique perspective on the operations of the company. […]
I talk a lot about finance. After all, I have a Master’s in Business Administration (MBA) with a specialization in finance and M&A. I think telling the story of a business through numbers and being able to interpret a business through financial reporting is pretty neat.
But more than just being neat, it is incredibly important and valuable. It is so important that in some Fortune 500 companies the CFO is as valuable as the CEO (in fact, a common way to become a CEO is by first becoming CFO). Sitting in on Wall Street earnings calls, often it is the CFO doing most the talking while the CEO can take a bit of a back seat. The large consolidators actively recruit seasoned CFOs that have experience in consolidating industries.
But this is less the case in the rest of the collision industry. […]
I’m excited to present a slightly different style of article this week that I present at the end of this post. I’ll be doing more of these articles in the future and hope they prove to be a useful way to exchange information.
There has never been a greater need to develop a business strategy to determine the best path forward than now in the collision repair industry. The entrance of Wall Street money in the industry is causing rapid structural change. No longer is the collision industry just about fixing cars and minding your KPI’s.
The industry is maturing. As a result, business models are changing too. […]
Previously I spoke about how collision repair operators will have to develop new core competencies in order to compete against the increasing competitive pressures as a result of industry consolidation. As we saw last week, consolidation is a trend that is not going away, and most likely will continue in frequency and intensity. Collision repair is no longer just about fixing cars and minding KPI’s.
In business school we talked a lot about core competencies. The most basic definition of a core competency is something a business is really good at. In collision repair, most operators would have a core competency in vehicle repair and customer service.
In fact, we may actually be too good at those things. […]
For the past few weeks we have been speaking about the options that are available to a collision repair operator: stand pat, grow, or sell.
I spoke at some length about the risks involved in each strategy. Standing pat is a risky strategy due to the concentration of risk into a single business in a single city / region.
Growing is risky because it involves developing a new set of core competencies built around high level financial management as well as acquisition and integration competencies. Most collision repair businesses have not developed these competencies; and those that have developed those competencies now compete for deals against other large MSO’s with extensive experience sourcing, closing and integrating acquisitions. (Editor’s Note: Keep an eye out for an upcoming article about how the franchise model plays a role in growth.)
Selling is similarly risky as there is almost a certainty that a buyer will have vastly more experience in a business transaction, leaving you and your business vulnerable. Buyers will pay a premium for a well-documented, well-run business but most collision repair businesses have little experience presenting financial information in a usable format to a multi-million dollar institution.
Those are the risks. But I promised an article about opportunities! […]
Working Capital is something that is scrutinized by almost every company but rarely talked about in the collision industry.
But I guarantee every large MSO in your marketplace is actively managing Working Capital.
It is also something that major vendors will consider if you are negotiating for a pre-bate or other consideration for purchasing their product.
Banks look at it too. If you want to borrow money to grow, they will scrutinize Working Capital to ensure that you can afford the loan.
If you ever sell your business, it will be a hotly negotiated topic as well.
Most business owners do not look at working capital until one of the above situations forces a working capital negotiation. But that is the wrong time to start managing working capital. It is like going on a diet the week before your annual doctor checkup. […]
The collision industry is a $30 billion market in the U.S. But not a single company accounts for even $1 billion in sales. There is a race to get to the $1 billion in sales mark. (Editor’s note: keep an eye out for our upcoming article on what is driving this race to $1 billion).
The quickest way to get to the $1 billion mark is to acquire other businesses that already generate a few million dollars in sales. So the consolidators need you – but they are also afraid of you.
They are afraid of you because you lack experience.
The large consolidators by their very nature are incredibly cautious. They are backed by some of the largest financial institutions in the world and are stewards for hundreds of millions of investment dollars. They unfortunately cannot just “take your word for it”.
Sure you have been in business for years. You have long term employees. You have long term referral accounts via DRP’s or dealer referrals and repeat business.
But you are inexperienced in their world. […]
Many owners I interact with still run their business the same as the day they started. They are the first one there in the morning and the last one to leave. They know what is going on with every file. They are the only ones allowed to make decisions.
This level of dedication is admirable. Unfortunately while it can feel profitable and even feed our own ego, it often gets in the way of maximizing the value of your business. You want your business to run better today and be better positioned for tomorrow – even if you are not planning on selling any time soon.
In order to maximize the value of your business you have to view your business from the outside in. Or, as a good friend of mine once told me, work on your business not in your business. […]
I wanted to take a break from talking about finance and the collision industry and spend a bit of time discussing the importance of employee alignment and engagement.
Normally we talk about growth and how to finance and account for that growth. But what gets lost in that narrative is that growth is impossible without a group of people working towards a common goal.
In corporate management speak, that is called “employee alignment”.
What is employee alignment? In its shortest form, alignment is about getting employees to think like owners. […]
Previously we spoke a bit about maximizing enterprise value vs. maximizing profit margins.
Many people in business fail to realize the distinction between the two concepts. If you maximize profitability, you maximize the value of your business, right?
Not always. In business everything is always a trade off. […]